Tuesday, April 11, 2006

Wright Amendment?

Over the weekend, my friend Becca, who recently began her career as a flight attendant with Southwest Airlines, brought the dispute over the Wright Amendment to my attention. The Wright Amendment is a federal law that limits flights departing from Dallas’ Love Field to a select number of states bordering or near Texas.

For those new to the debate, Dallas has two major airports, the older and smaller Love Field and the newer and larger Dallas Fort Worth International Airport. Southwest is the primary airline operating out of Love Field, while American Airlines has the largest presences at DFW along with many other major airlines.

I am not sure about the details of how this whole situation came into being, but it seems that when Dallas decided to build DFW, they convinced the major airlines to go along with the relocation by telling them that the city would close Love Field. Unfortunately for that plan some of the smaller airlines wanted to keep Love Field open and a federal court agreed with them. In response to that, city and major airline interests lobbied for the Wright Amendment to limit competition from the airlines operating out of Love Field.

Below I briefly describe some of the principle stakeholders in this situation and their interests. Southwest wants to get rid of the Wright Amendment so that they can compete with American to destinations throughout the US. By operating at the larger DFW, American has to pay higher gate and landing fees than Southwest does at Love Field, so American is concerned about allowing Southwest to compete with a lower cost basis (I have not been able to find out how much higher the fees are at DFW than at Love Field). The Cities of Dallas and Fort Worth, who together own DFW, are concerned because DFW apparently has lots of debt due to recent expansions so they want to make sure that DFW can continue to service its debt. The traveling public just wants convenient and inexpensive air transit to and from Dallas and not to have to pick up the tab on DFW’s debt.

To solve this situation, the federal government should repeal the Wright Amendment and the Cities of Dallas and Fort Worth should privatize both Love Field and DFW. Privatization of Love Field and DFW would allow private sector airlines to negotiate the terms of their landing and gate fees with competing private sector airports. This would help equalize the fees at both airports as other low cost carriers, such as Jet Blue, have indicated that they would want to operate out of Love Field if the Wright Amendment was repealed thus bidding up fees. We saw recently in the Indiana Toll Road Deal that private companies are interested in owning infrastructure. So private capital can retire any DFW debt. Finally removing the political conflict of interest can allow market mechanisms and creativity to drive innovation at both DFW and Love Field, which will result in increased value for the consumers.

Other than the narrow interests of the involved politicians, why can’t this work?